Ch 2.1 Vocab

Ability to pay The belief that people should be taxed according to their ability to pay, regardless of the benefits they receive. The U.S. individual income tax is based on this principle.

Benefits- received principle The belief that people should be taxed according to the benefits they receive from the goods and services the tax supports. The gasoline tax is an example.

Free Rider One who enjoys the benefits of goods and services without paying for it.

Progressive Tax A tax that takes a larger percentage of income from people in higher-income groups than from people in lower-income ones; The U.S. federal income tax is an example.

Regressive tax A tax that takes a larger percentage of income from people in lower-income groups than from people in higher-income ones; Sales tax and excise tax are examples.

Taxes Governments fees on business and individual income, activities, or products to support government programs.